A common complaint about Xbox Live is that Microsoft is charging for something that you get for free on any other platform (PC, PS3, Wii). For many people free is their favorite four-letter word, and it is just a price you cannot beat. The inability to charge for online services of any sort (read: not just gaming) is a major problem though. This isn’t just about games, here’s why.

Money Isn’t The Root Of All Evil, It Pays My Mortgage

I don’t know exactly how this all started, but the very thought of paying for any service online is almost unthinkable for most people. Microsoft made a bold, but I think smart, choice when it decided to make the Xbox Live Community Games a marketplace of buyers and sellers; a place where creators can be rewarded for their work and aren’t pressured to work for free. After all what is really so bad about paying someone for something they do?

With the Xbox 360 (or any other console) you have people paying $300-$400 for a console, buying multiple $60 games, extra $40 controllers, and then they are going to balk at paying $45 for 13 months of service? That is only $3.46 per month. Pretty reasonable considering most MMOs cost about three times as much. Do people think that it just goes straight into Steve Balmer’s personal bank account or something?

The money really goes to pay people (regular ones, just like you and I) that work to create the hands-down easiest, most seamless, integrated, and arguably best online gaming experience available. I don’t think it is a coincidence that the only online gaming service you pay for was found to be the best, even amongst PS3 and Wii users, in a recent poll. Obviously this would be a different discussion if the Playstation Network was overwhelming seen as the top platform, but it isn’t.

You Don’t Get What You Don’t Pay For

There is an old adage that says “You get what you pay for.” I use the converse of that statement mostly though, “You don’t get what you don’t pay for.” I’m sorry if this sounds like Econ 101, but in a market driven economy paying is a crucial method of voting (signaling) for what you want so that people will build it. There is essential information inherent in a paying transaction that you approve of what someone did, and that they created value beyond what you are paying them.

If you have a situation like is common on the Internet today, the people who pay are actually the advertisers. So many sites and services are slaves to their advertisers because their users won’t pay a dime. I have asked many people I know who live and die by Facebook how much they would pay for it, and they all said zero. They all spend at least an hour a day on it, but it is apparently worthless to them, and much of what they want is never conveyed in any meaningful transaction.

So Facebook becomes a slave to advertising and pimping out their users’ information for every cent they can get. It isn’t unrealistic to think that if people paid for more services that their personal information wouldn’t be shared quite so freely. The sites don’t work for you though, they work for the advertisers. I’m not saying all online services or sites should shun advertising, but it is ridiculous how much the solution to every Web 2.0 business model is advertising.

In many ways the Internet has been one of the greatest economic tools of all time. Viable marketplaces will have to be developed as more and more things are done online though. Almost everyone shops online for tangible products, but something really needs to be done to make intangibles not a solely advertiser sponsored economy.